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EUR/JPY Explodes Higher; May Consolidate

EUR/JPY Explodes Higher; May Consolidate

Jeremy Wagner, CEWA-M, Head of Education

We bought EUR/JPY last week near 116.60 on a breakout above a small trend channel. The pair has worked higher in strong fashion signaling that we may be in a third wave higher. Third waves tend to be the longest and the strongest of the five wave Elliott Wave sequence so we will tighten the stop loss closer to the current price action in case the market turns against the position.

EUR/JPY is starting to bump up against a longer term price channel (blue line) near 122. This blue trend line may create a reaction lower towards 119. Since we may be in a third wave, a retracement may not reach all of the way to 119, but a retracement this deep is normal within the identified pattern.

We are anticipating an eventual break higher outside of the blue trend channel to retest 124 and possibly 133. The current stop loss is set near 117.82. If this level breaks to the downside, then another pattern is at play.

EUR/JPY was a top trading opportunity of 2017 by two of our analysts. Find out what they had to say on in this “Top Trading Opportunities 2017” guide.

Join Jeremy in his Monday US Opening Bell webinars to discuss this market and others.

Interested in learning more about Elliott Wave Theory? Watch these videos on trading with Elliott Wave.

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.